<i>Dear Workforce</i> How can I Measure the Impact My Skills Have on the Bottom Line?

March 12, 2003

Dear Head-Scratcher:You're wrestling with a problem that has always plagued HR executives. The HR function is undeniably overhead. HR doesn't really produce anything; it isa cost of doing business, in the view of some, and the best it can show is costavoidance. Unfortunately, defining cost avoidance is a bit like nailing Jell-O to a wall since you're dealing with "what it could've cost," rather than what it did cost.Recruiting costs are typically a high-profile budget item. Even at 17 percent, signing a check for the recruiting fee for a $100,000 salary higher causes most CFOs to shudder. A word of caution on recruiting fees: Yes, you can get a 17 percent fee now when the economy is down and still get some good hires. But once the economy improves, watch for the number of good hires to decline dramatically when you go through the agency channel. The agencies know whenthey've got good candidates and they'll send them to the organizations thatwill pay 25 percent or more, and not to the client paying 17 percent. Yoursavings here will therefore last only so long as the economy is in decline. Thenyou'll have to explain why your recruiting expenses went up, because you will have to pay the higher fees to get good people.Depending on the number of new hires you need each year, consider adding avery Internet-savvy recruiter to your staff. A good recruiter who can mine theInternet for low-cost quality hires can help you avoid significant recruiting costs and more than justify the cost of the new position in just a few months.Benefits are another high-cost area. How aggressively are you negotiatingyour health insurance rates? Are you shopping them around to various vendors? Are you looking at partial or total self-funding arrangements? Are there anyindustry or trade associations that, for a smaller company, have an agreement with a carrier that provides member companies with favorable rates? If you can consistently show a renewal rate for health insurance several percentage points below the renewal average, you're saving the company money.Avoiding legal representation costs is good, and you can certainly point outhow much your legal background saves the company. Even better, though, would bereducing the situations that incur those legal costs in the first place. What measures can you develop and implement that will reduce the number of cases going to arbitration? Can you reduce the number of sexual harassment complaints, wrongful termination suits, or wage and hour complaints? What is yourunemployment-insurance rate? Is it as low as it can get for an employer of your size, or are terminated employees winning UI cases that they shouldn't be, and driving up your insurance rate? Reductions in all of these areas not only avoid legal costs, they also mean fewer distractions for line management and a more content and productive workforce.Cost avoidance is at best a short-term measure of your performance. You might ook like a superstar for a year or two but then all the easy cost savings will have been realized. A better approach would be to develop a long-term workforce strategy with measurable goals that go way beyond cost avoidance. Some of thei ssues noted above could be good starting points. Good luck.SOURCE: Carl Norcross holds amaster's degree in human resources and has more than 20 years leading HR departments. He has worked for several midsize and Fortune 500 firms, including GRID Systems, Colorado Memory Systems, and Nortel Networks.LEARN MORE: Read Measure WhatYou Bring to the Bottom Line.The information contained in thisarticle is intended to provide useful information on the topic covered, butshould not be construed as legal advice or a legal opinion. Also remember thatstate laws may differ from the federal law.